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To: BfloGuy
The number of people employed at any particular time depends on the relationship between the demand for labor vs the level of average money wage rates, not on the marginal tax rates. The formula is: average money wage rates = demand for labor/supply of labor. More jobs are created when wage rates are not too high compared to the demand for labor.

Lower taxes leads to more savings which leads to more investment which leads to more productive expenditure which may or may not lead to more demand for labor.The more productive expenditure could lead to more demand for capital goods instead, which might hold down increases in demand for labor.

So one cannot directly link lower taxes to job creation. It helps but does not cause.

18 posted on 06/09/2012 4:45:44 PM PDT by mjp ((pro-{God, reality, reason, egoism, individualism, natural rights, limited government, capitalism}))
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To: mjp
Lower taxes leads to more savings which leads to more investment which leads to more productive expenditure which may or may not lead to more demand for labor.

I agree which is why I scrupulously refrained from adding creating-jobs into my post. Creating jobs is a function of confidence in the future.

20 posted on 06/09/2012 4:51:26 PM PDT by BfloGuy (The final outcome of the credit expansion is general impoverishment.)
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To: mjp

Mjp is on the right track but its a bit more complicated. The amount of revenue realized from income is primarily determined by the total number of workers paying taxes. The tax rate on income contributes to a workers perception of what their labor is worth. If they can’t take home enough money after taxes based on this perception they won’t accept the job and no tax revenue is generated. This is why we accept the Marxist notion of progressive tax rates. If you can make $250,000 a year you accept a higher rate as long as what you take home for your effort still meets your expectation of worth. At some point the work is “just not worth it” an you either find a way to avoid taxes (cash, barter, tax shelters, deferral) or you don’t do the work. Either way the tax revenue is lost to the government.
The governments main focus should be to create the optimum environment that results in the greatest number of people working for the highest wages based on their productivity. This is best done by minimizing regulation, red tape, and bureaucratic obstacles to business formation. Growing the pie is a win for everybody including the government. Tinkering with tax rates beyond the extremes just contributes to class warfare and envy.


45 posted on 06/09/2012 5:58:25 PM PDT by Dave Wright
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